Correlation Between Hyosung Chemical and Hankook Steel

Can any of the company-specific risk be diversified away by investing in both Hyosung Chemical and Hankook Steel at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hyosung Chemical and Hankook Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hyosung Chemical Corp and Hankook Steel Co, you can compare the effects of market volatilities on Hyosung Chemical and Hankook Steel and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hyosung Chemical with a short position of Hankook Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyosung Chemical and Hankook Steel.

Diversification Opportunities for Hyosung Chemical and Hankook Steel

0.73

Correlation Coefficient

Hyosung Chemical  Hankook Steel

Poor diversification

The 3 months correlation between Hyosung and Hankook is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hyosung Chemical Corp and Hankook Steel Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hankook Steel and Hyosung Chemical is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hyosung Chemical Corp are associated (or correlated) with Hankook Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hankook Steel has no effect on the direction of Hyosung Chemical i.e., Hyosung Chemical and Hankook Steel go up and down completely randomly.

Pair Corralation between Hyosung Chemical and Hankook Steel

Assuming the 90 days trading horizon Hyosung Chemical Corp is expected to generate 1.74 times more return on investment than Hankook Steel. However, Hyosung Chemical is 1.74 times more volatile than Hankook Steel Co. It trades about -0.01 of its potential returns per unit of risk. Hankook Steel Co is currently generating about -0.12 per unit of risk. If you would invest  3,960,000  in Hyosung Chemical Corp on December 30, 2024 and sell it today you would lose (70,000) from holding Hyosung Chemical Corp or give up 1.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.31%
Values	Daily Returns

Hyosung Chemical Corp  vs.  Hankook Steel Co

Hyosung Chemical Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hyosung Chemical Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hyosung Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hankook Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hankook Steel Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hyosung Chemical and Hankook Steel

The main advantage of trading using opposite Hyosung Chemical and Hankook Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyosung Chemical position performs unexpectedly, Hankook Steel can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hankook Steel will offset losses from the drop in Hankook Steel's long position.

The idea behind Hyosung Chemical Corp and Hankook Steel Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.